State of Mind

Why did the Port Authority of New York and New Jersey pay $235 million for Bayonne marshland? According to new reporting from The New York Times, the purchase was a direct bailout of the financially teetering New Jersey city -- a move aimed to keep Gov. Chris Christie from having to flood state money to Bayonne to keep it from Chapter 9 or some other untenable state of de facto bankruptcy.

It was a financial move of quasi-legal proportion. But it was also political: For Republican governor with ambitions of being the president of the United States, any clandestine deal done to ward off the need for tax dollars was a way to prop up the facade of fiscal conservatism. But how conservative is it to rob Peter to pay Paul?

The answer, of course, is that it has nothing to do with conservatism, or financial prudence, or good government. It has everything to do with the standardized abuse of public entities and authorities by politicians and their banker/bondsman masters. The shell game keeps them in power, and in the money, while the America we know is drained of its very lifeblood, one municipality at a time.

I don't see America anymore as a series of independent towns and cities whose existence weaves the complex fabric of this large and varied country. What I see are ATM machines for the rich and powerful to use at their discretion, to feed their political and financial appetites and proclivities.

This is not to paper over the vast complexities in running cities and states and providing services for people. What is troubling is that instead of confronting these complexities and speaking honestly to citizens about the real problems and the real costs, the political and banking classes have colluded to profit in the face of problems that will, indeed, bankrupt us. Anything to maintain power, and keep their hands in the cookie jars, even if Rome burns, or pension funds fail. This is where our democracy is faltering: At the place where money and power collide and the real, hard work of regenerating wealth and enhancing infrastructure/services is left undone.

In this way, what started as the shocking story about the closure of George Washington Bridge lanes in Fort Lee in September 2013 has, thankfully, morphed into a somewhat systematic investigation of every weird deal done under Chris Christie and his very good pals at the Port Authority.

The Port Authority isn't just Christie's Sugar Daddy, it has been the absolute cauldron of cash and lever-pulling that guaranteed Christie's ability to pull off big fixes that could, left undone, complicated his narrative. At least that's what the NYTimes reporting so far is indicating.

A takeover could have forced the state to pour millions into Bayonne to stabilize it. That would have been problematic for Mr. Christie, who was confronting a huge deficit in New Jersey’s budget, while trying to keep a campaign promise to not raise taxes. The Port Authority’s purchase of the land, orchestrated by Bill Baroni, Mr. Christie’s top staff appointee at the agency at the time, spared Mr. Christie from having to confront this dilemma. The agency wound up spending far more for the land than an independent appraisal showed it was worth.

Forum Place got a bailout. Harrisburg did not.

In this way, there is very little difference between Republicans and Democrats when it comes to abusing public financing in order to hide problems, or, worse, dole out cash to the banker/political class, all while expecting taxpayers and property owners to suffer the consequences of their corruption and abuses.

In Harrisburg, a third-class city that merely serves as the capital of Pennsylvania, Democrats and Republican "leaders" in both the Ed Rendell and Tom Corbett administrations performed surreal feats of legal backflips and bullying to keep Harrisburg from filing Chapter 9 protection in the face of overwhelming debt. In addition to the fraudulent bonds floated for a magical-thinking incinerator retrofit, the city is home to loads of other debt, including the school district. By some estimates, the city of 50,000 mostly poor, African-American residents were fleeced to the tune of $1 billion in debt. The state takeover via Act 47 was so nebulous that it led to the dismissal of several state-appointed officials who dared tell the power brokers that Harrisburg had been abused and needed a cram down of bondholders to make any deal work.

In keeping with the new spirit of questioning how some people continue to work out good deals for the banking/political classes while saddling the rest of the population with unimaginable debt, I can't help but wonder how, in the midst of Harrisburg's forced receivership and recovery plan, how did the Commonwealth decide to pay $100 million for an office building whose debt had already been defaulted on? How did the Commonwealth decided to buy Forum Place for 100 cents on the dollar when, for years, the bonds had been floating in the market for as little as 42 cents on the dollar?

Here is a city sinking into the Susquehanna River -- a virtual Athens, Greece of overwhelming debt and government corruption -- that was forced by the state to accept total responsibility for debt it can not afford to pay, yet in the middle of this Act 47 forced recovery plan, the state still finds a way to pay $100 million for a Forum Place building it could have bought for $42 million, or, maybe $60 million.

Somehow, the players involved in transferring that debt to the state through the building sale were powerful enough to pull off a deal in which everyone was made whole. Here is the bond deal for Forum Place, with an opinion written by Rhoads & Sinon, a Harrisburg law firm that was a key player in determining whether the Harrisburg Authority needed a performance bond for the contractor who undertook the incinerator refit. The lack of a performance bond is a key issue into how and why financing was approved for a construction deal that was ill-fated from the start, thus saddling the city with $300 million in debt.

Somehow, as the city of Harrisburg was prevented from a legal process that entitled the city to seek a cram down of the fraudulent debt, the same state officials who prevented Harrisburg from a more fair recovery plan turned around and orchestrated a building sale for almost twice as much as the bond market had been seeking.

According to a Bloomberg News, the bonds had been trading for as low as 25 cents on the dollar in 2004, which means that Forum Place could have been purchased for $25 million 10 years ago.

The Pennsylvania Economic Development Financing Authority (26718MF) plans to sell $106.4 million in bonds to buy a Harrisburg (9661MF) office building connected to bonds in default.

The Dauphin County General Authority (26630MF) bought the Forum Place building in the state capital in 1998 with $86.2 million raised with revenue bonds that went into default by 2002, according to a July 2006 SEC opinion in a related matter. The agency said the county defaulted after the building’s occupancy rate fell to 45 percent from almost 100 percent as state agencies moved out.

The state authority, known as Pedfa, will lease the nine- floor Forum Place to the nonprofit Capital Region Economic Development Corp., according to a preliminary official statement for the sale. The offering is planned for as early as this week. Dauphin County will use the money to refund building debt.

Bondholders called for full repayment of about $59.5 million of the county’s debt in April, plus about $3.2 million in accrued interest, according to a notice filed July 15. The interest was paid the same day, the notice said.

A county revenue bond maturing in January 2025 traded as low as 25 cents on the dollar in November 2004. Last month, the same security traded from about 42 cents to 60 cents on the dollar, according to data compiled by Bloomberg.

While the sexy story of Chris Christie's "BridgeGate" has given way to a much slower, less thrilling dig into the patterns of abuse by New Jersey and the Port Authority, Christie's implosion remains a very important turning point in American politics. Or, at least it should.

The financial trouble of underfunded pensions and criminal abuses of our economic systems are many, from the tranches and derivatives and selling off of American assets that have allowed a massive transfer of wealth. But no wide-scale recovery can take place until more people understand the way in which the system is not just rigged, but completely bankrupt.

The corruption is widespread. It is systemic. But when you start to look at every single deal, whether it's Bayonne marshland bought for $235 million, or along-embattled and defaulted Harrisburg office building sold for 100 cents on the dollar to the state of Pennsylvania, you get a pretty clear idea how these guys run these deals. They do it for power. They do it because they think they can get away with it. They do it for themselves.

LAURA VECSEY

I used to write politics, news and sports for newspapers in cities like Albany NY, Seattle, Baltimore and Harrisburg PA. Now I take a lot of Instagram photos, check Facebook, swim, read about T$$$p and cook dinner for people I really like. New York native, living in Port Washington and Greenfield Center (that's near Saratoga Springs FYI).